There are record amounts of commercial property coming onto the market as, in some cases, owners fight for survival following a battering from the Covid pandemic comes on top of a declining bricks and mortar retail market.
According a recent report by international property broker, Jones Lang LaSalle, there are companies across Europe, the Middle East and Africa that have sold £23 billion worth of commercial properties last year.
Companies owning these commercial property investments are raising cash to reduce balance sheet debt and are prudently preserving their capital, as well as rebalancing their portfolios.
All this is done in the light of the effects of the pandemic and the long-term structural changes affecting the commercial property market.
Around one-third of corporate property sales to-date has been in offices, sales which account for a figure that’s around 10 per cent above the volumes seen in the previous year.
Rents cut off
With lockdowns cutting-off rent revenue streams almost overnight, and persisting to today, retail and hospitality businesses have been particularly badly hit.
Many of the commercial property sales already achieved have been sale and leaseback deals allowing the affected companies to access cash whilst maintaining control over their premises and businesses, whether this be business retailers or owner landlords.
Well known retail chains have been assessing the profitability of their stores across their estates and they are closing down the less profitable ones. In the U.K., The John Lewis Partnership and Matalan are examples of how this trend is unfolding, while many others large and small are following in their wake.
The sudden switch to home working during the last year, and the general decline of the high street outside of the major cities, as home deliveries have rocketed, have changed the outlook entirely from 12 months ago.
These factors are forcing office-based and retail-based businesses to take a long hard look are their commercial property needs for the future.
For example, John Lewis now claims that 60 per cent to 70 percent of its sales by values are internet sales and home deliveries.
Alternatively, one area of commercial business that has thrived during the pandemic is out-of-town warehousing and distribution centres, boosted by the rocketing volumes of home deliveries.
This is resulting in a rotation of investment funds from the traditional high street store and city offices into commercial “sheds” in strategic distribution locations.